The UNIDROIT Convention on Substantive Rules for Intermediated Securities was adopted and opened for signature at Geneva on 9 October 2009, at the final session of the diplomatic conference held under the auspices of the International Institute for the Unification of Private Law, at the invitation of the Swiss Confederation. The English and French texts are equally authentic, in a single original; authenticity takes effect after linguistic verification by the Conference Secretariat within one hundred and twenty days. The depositary is UNIDROIT. It is not the 2006 Hague Convention on the law applicable to certain rights in securities held with an intermediary, which chooses the law rather than laying down substantive rules.

The preamble recognises holding securities through intermediaries, the need to reduce legal risk and systemic risk, and the wish for a common framework, without harmonising insolvency law except so far as necessary for the effectiveness of rights governed by the Convention. Contracting States keep the power to regulate and oversee holding, unless that regulation would contravene the Convention. Articles 1 to 8 define the securities account, the relevant intermediary and the sphere of application: the Convention applies to securities credited to an account and to the acquisition or creation of rights in them; the functions of central banks and of regulated intermediaries remain with national law where the Convention so provides.

Article 9: the credit of securities to an account confers on the account holder the right to receive and exercise the rights attached, including dividends and voting, the right to effect a disposition under Articles 11 and 12, and the right, by instructions, to cause the securities to be held otherwise than through an account, within the limits of the applicable law. Article 10 requires the intermediary to take appropriate measures so that the holder can exercise those rights, including protecting the securities, allocating them so that they are unavailable to the intermediary’s creditors, and passing on information and distributions where non-Convention law or the account agreement so provides. The clauses remain a framework, not a settlement handbook.

Articles 11 to 13: acquisition and disposition are made by debit and credit, by other methods the Convention provides, or under non-Convention law. Article 14: rights that have become effective against third parties are effective against the insolvency administrator and creditors, without displacing rules on ranking, avoidance of transfers in fraud of creditors, or enforcement of property under the administrator’s control. Article 15: an intermediary may debit or dispose only if authorised by the account holder or, where relevant, by the person in whose favour a designating entry was made. Article 18 protects an innocent acquirer; Articles 19 to 21 set priority among competing interests. Article 22 prohibits upper-tier attachment. Articles 24 to 26 require sufficient securities, their allocation, and loss sharing on the insolvency of the intermediary; they are not a calculation formula.

Chapter V, Articles 31 to 38, concerns collateral agreements over intermediated securities: recognition of title-transfer collateral, enforcement on an enforcement event, a right of use if the agreement so provides, and the disapplication of certain insolvency provisions. A State may declare that the whole Chapter shall not apply. The Chapter remains a framework of recognition, not a protocol of enforcement, close-out netting or collateral valuation.

Article 40: open for signature at Geneva on the day of adoption by States participating in the conference; thereafter at UNIDROIT headquarters in Rome until entry into force. Ratification, acceptance, approval or accession is by deposit of an instrument with the depositary. Regional economic integration organisations may sign, with a declaration of competence. Article 42: the Convention enters into force on the first day of the month following the expiration of six months after deposit of the third instrument; the same interval applies to later instruments.

Article 43 permits declarations for territorial units. Article 44: no reservations may be made. Article 46: denunciation takes effect on the first day of the month after six months, without affecting rights arising before that date. Article 47: evaluation meetings not later than twenty-four months after entry into force. The cover shows the Palais des Nations in Geneva, a landmark of the city where the Convention was concluded, not the conference hall.

Sources consulted: Geneva Securities Convention; official UNIDROIT text, Convention on Substantive Rules for Intermediated Securities.